NEW YORK — Investors gave Salomon Inc. a vote of no confidence Thursday after Warren Buffett, the investment bank's largest shareholder and recent rescuer, announced plans to partly cash out.

Buffett, whose every move is scrutinized for signs of where other investors should put their money, opted to cash in $140 million of preferred Salomon shares rather than convert them to common stock.

Salomon stock immediately dropped nearly 6% on the news--even though it was announced in a report by Salomon of unexpectedly strong earnings in the third quarter. The stock recovered somewhat by afternoon, closing down $1.75 to $38.375 on the New York Stock Exchange.

The decision by the legendary billionaire raised questions about Buffett's long-term view of the troubled investment bank, which is struggling to recover from several money-losing quarters, defections of valuable employees and repeated bookkeeping snafus.

Following a 1990 Treasury auction scandal at Salomon, Buffett stepped in to temporarily run the firm. He revamped management, installed new controls, personally apologized to the U.S. government and generally helped restore Salomon's credibility with the investment community.

The rescue operation was seen as a bold move even for Buffett. Buffett controls Berkshire Hathaway, the famous and aggressive investment conglomerate headquartered in Omaha, with interests in everything from Coca-Cola to Capital Cities/ABC to Geico insurance.

However, since last year, a series of business miscues and damaging staff defections at Salomon have compounded a slack earnings picture. Salomon lost money in two of the last four quarters and reported a $399-million deficit for all of 1994, its first annual loss. The woes have left Wall Street wondering what action, if any, Buffett would take.

Specifically, Buffett opted to cash in part of his convertible preferred shares for $140 million in cash at the end of the month.